The Young Doctor Has It Wrong

This post first appeared as a column in Rochester's daily newspaper the Democrat & Chronicle on Sunday, January 19, 2020.

A guest column in this newspaper by a medical student, Toby Terwilliger, makes a case for Medicare for All (M4A) – an unsubstantiated case.  He begins by referencing the high cost of medical care in the U.S. and its relatively poor outcomes.  So far, so good.  He projects current costs of $4 trillion annually will rise to $6 trillion by the end of the decade.  He declares that M4A will reduce costs by $500 million per annum, a figure he has plucked from Senator Elizabeth Warren’s website.  Unfortunately, he fails to make a case as to how those costs and outcomes might improve under M4A.  M4A will add $3 trillion to annual Medicare costs if and only if reimbursements are reduced to a level below the cost of providing the services according to an often-cited study by a former trustee of Medicare under presidents Bush and Obama.  Otherwise there would be no savings.

Mr. Terwilliger bases his conclusion about the high cost of healthcare on a simple premise that our “healthcare industry puts profits over patients.”  That’s speculative at best.  The Kaiser Family Foundation projects that annual per capita Medicare spending will increase by 5.1% compared to 4.6% for private insurance over the next decade.  Eliminating profit from the system won’t reduce costs.  It never does.  The profit motive drives efficiency and lower costs.  

This is not only true of consumer products and services but also medical procedures. In an unregulated environment, the cost of cosmetic surgery has not increased as fast as consumer prices over an 18-year period according to The American Society of Aesthetic Plastic Surgery.  Meanwhile, medical inflation drove up the cost of healthcare by 177% or more than triple the rate of overall inflation.  

A study by the non-profit North Texas Clinically Integrated Network, Inc., an Accountable Care Organization created under the auspices of the Affordable Care Act, cites eight key drivers of cost.  First among them is the “Fee For Service” (FFS) payment system which “generates a strong incentive for driving up the volume of tests and services.”  Any reform of our health insurance system that doesn’t include a shift from FFS to a value-based system will fail to address our high cost and poor outcomes.  

In a guest column I wrote for this newspaper last year, I laid out four principles essential for effective healthcare reform: (1) universal coverage, (2) reform the FFS system, (3) price competition and (4) cost-sharing.  Rolling out M4A would not address the last three of these principles and would inevitably lead to higher costs without necessarily improving outcomes.  

Mr. Terwilliger demonizes CEO’s who earn millions from the profits of the healthcare system.  But it’s doctors who have benefited most from FFS.  In the days when doctors made house calls, the automobile known as the “doctors’ car” was a Buick not a Mercedes-Benz. 

WHO WILL LEAD?